1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549
FORM 10-K/A
-----------
AMENDMENT NO. 2
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended November 27, 1999 Commission File No. 0-209
BASSETT FURNITURE INDUSTRIES, INCORPORATED
------------------------------------------
(Exact name of registrant as specified in its charter)
VIRGINIA 54-0135270
------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3525 FAIRYSTONE PARK HIGHWAY
BASSETT, VIRGINIA 24055
-------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 540/629-6000
-----------------------
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class: on which registered
-------------------- -------------------------
Common Stock ($5.00 par value) NASDAQ
------------------------------ ------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for at least the past 90 days.
[ ] Yes [X] No
This Form 10-K/A Amendment No. 2 was filed April 11, 2000, subsequent to the
March 31, 2000 required filing date.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of February 22, 2000 was $144,179,431.
The number of shares of the Registrant's common stock outstanding on February
22, 2000 was 11,906,732.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Bassett Furniture Industries, Incorporated Annual Report
to Stockholders for the year ended November 27, 1999 (the "Annual
Report") are incorporated by reference into Parts I and II of this Form
10-K.
(2) Portions of the Bassett Furniture Industries, Incorporated definitive
Proxy Statement for its 2000 Annual Meeting of Stockholders to be held
March 28, 2000, filed with the Securities and Exchange Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934 (the
"Proxy Statement") are incorporated by reference into Part III of this
Form 10-K.
2
Explanatory Comment:
Amendment No. 1 on Form 10-K/A was filed to correct printer typesetting mistakes
in the Report of Independent Public Accountants dated January 17, 2000, which
appears on page 17 of the Registrant's Annual Report to Stockholders for the
year ended November 27, 1999. No other changes were made to the Annual Report on
Form 10-K by Amendment No. 1.
This Amendment No. 2 on Form 10-K/A is being filed to file the Financial
Statements of a significant affiliate of the Company. The Financial Statements
of the Bassett Industries Alternative Asset Fund, L.P. which has a fiscal year
end of December 31, which is different than the Company's fiscal year end, are
included herein on pages F-16 to F-25. No other changes are being made to the
Annual Report on Form 10-K by this Amendment No. 2.
3
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The following consolidated financial statements of the
registrant and its subsidiaries, included in the Annual Report
are incorporated herein by reference thereto:
Consolidated Balance Sheets--November 27, 1999 and
November 28, 1998
Consolidated Statements of Operations--Years Ended
November 27, 1999, November 28, 1998 and November 30,
1997
Consolidated Statements of Comprehensive
Income--Years ended November 27, 1999, November 28,
1998, and November 30, 1997
Consolidated Statements of Stockholders' Equity--
Years Ended November 27, 1999, November 28, 1998 and
November 30, 1997
Consolidated Statements of Cash Flows-- Years Ended
November 27, 1999, November 28, 1998 and November 30,
1997
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
International Home Furnishings Center, Inc. Financial
Statements are included herein on pages F-1 to F-13.
Bassett Industries Alternative Asset Fund, L.P. Financial
Statements as of December 31, 1999 and 1998, and November
30, 1998 are included herein on pages F-16 to F-25.
(2) Financial Statement Schedule:
Schedule II - Analysis of Valuation and Qualifying Accounts
for the years ended November 27, 1999, November 28, 1998, and
November 30, 1997
(3) Listing of Exhibits
3A. Articles of Incorporation as amended are incorporated
herein by reference to Form 10-Q for the fiscal
quarter ended February 28, 1994.
3B. Amendment to the By-laws dated January 18, 2000,
including the By-laws as amended are filed
herewith.
4. $50 million Credit Agreement dated October 19, 1999
with First Union National Bank, is filed herewith.
4
- PAGE -11-
** 10A. Bassett 1993 Long Term Incentive Stock Option Plan is
incorporated herein by reference to the Registrant's
Registration Statement on Form S-8 (no.33-52405)
filed on February 25, 1994.
** 10B. Bassett Executive Deferred Compensation Plan is
incorporated herein by reference to Form 10-K for the
fiscal year ended November 30, 1997.
** 10C. Bassett Supplemental Retirement Income Plan is
incorporated herein by reference to Form 10-K for the
fiscal year ended November 30, 1997.
** 10D. Bassett 1993 Stock Plan for Non-Employee Directors as
amended is incorporated herein by reference to Form
10-K for the fiscal year ended November 28, 1998.
** 10E. Bassett 1997 Employee Stock Plan is incorporated
herein by reference to the Registrant's Registration
Statement on Form S-8 ( no. 333-60327) filed on July
31, 1998.
10F. Severance Agreement and General Release dated January
31, 1999 between Registrant and Douglas W. Miller is
filed herewith.
10G. Severance Agreement and General Release dated
November 27, 1999 between Registrant and John S.
Lupo is filed herewith.
13. Portions of the Registrant's Annual Report to
Stockholders for the year ended November 27, 1999.
21. List of subsidiaries of the Registrant is filed
herewith.
23A. Consent of Arthur Andersen LLP is filed herewith.
23B. Consent of Dixon Odom PLLC is filed herewith.
27. Financial Data Schedule (EDGAR filing only)
**Management contract or compensatory plan or arrangement of the
Company.
(b) No reports on Form 8-K were filed during the last quarter of the
Registrant's 1999 fiscal year.
5
- PAGE -12-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 2 on Form 10-K/A to be signed on
its behalf by the undersigned, thereunto duly authorized.
By: /s/ BARRY C. SAFRIT Date: 4-11-00
--------------------------------------- --------------------------
Barry C. Safrit
Vice President and Chief Accounting
Officer
(Principal Financial Officer)
6
[ ] PAGE [ ]13[ ]
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1)
CERTAIN EXHIBITS
YEAR ENDED NOVEMBER 27, 1999
BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES
BASSETT, VIRGINIA
7
INTERNATIONAL HOME FURNISHINGS CENTER, INC.
FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
8
INTERNATIONAL HOME FURNISHINGS CENTER, INC.
================================================================================
TABLE OF CONTENTS
Page No.
--------
INDEPENDENT AUDITORS' REPORT.......................................................................... 1
FINANCIAL STATEMENTS
Balance Sheets..................................................................................... 2
Statements of Income .............................................................................. 3
Statements of Stockholders' Equity (Deficit)....................................................... 4
Statements of Cash Flows........................................................................... 5
Notes to Financial Statements...................................................................... 6
9
F-1
[DIXON ODOM PLLC LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
International Home Furnishings Center, Inc.
High Point, North Carolina
We have audited the accompanying balance sheets of International Home
Furnishings Center, Inc. as of October 31, 1999 and 1998 and the related
statements of income, stockholders' equity (deficit), and cash flows for each of
the three years in the period ended October 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of International Home Furnishings
Center, Inc. at October 31, 1999 and 1998 and the results of its operations and
its cash flows for each of the three years in the period ended October 31, 1999
in conformity with generally accepted accounting principles.
/s/ Dixon Odom PLLC
- --------------------
Dixon Odom PLLC
High Point, North Carolina
November 22, 1999
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Page 1
10
F-2
INTERNATIONAL HOME FURNISHINGS CENTER, INC.
BALANCE SHEETS
OCTOBER 31, 1999 AND 1998
================================================================================
ASSETS 1999 1998
-------------- --------------
CURRENT ASSETS
Cash and cash equivalents $ 8,004,521 $ 16,396,705
Restricted cash (Note C) 2,275,974 2,275,974
Short-term investments 90,778 83,643
Receivables
Trade 2,253,583 2,163,950
Interest 14,627 36,892
Deferred income tax asset 610,000 592,000
Prepaid expenses 806,229 55,965
-------------- --------------
TOTAL CURRENT ASSETS 14,055,712 21,605,129
-------------- --------------
PROPERTY AND EQUIPMENT, at cost
Land and land improvements 3,293,772 3,293,772
Buildings, exclusive of theater complex 75,439,170 75,196,472
Furniture and equipment 3,631,421 3,536,662
-------------- --------------
82,364,363 82,026,906
Accumulated depreciation (43,926,570) (41,727,981)
-------------- --------------
38,437,793 40,298,925
-------------- --------------
OTHER ASSETS
Theater complex, at cost less amortization (Note G) 976,854 1,020,109
Deferred financing costs, net of accumulated amortization
of $104,413 in 1999 and $20,883 in 1998 480,296 563,826
-------------- --------------
1,457,150 1,583,935
-------------- --------------
TOTAL ASSETS $ 53,950,655 $ 63,487,989
============== ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable, trade $ 780,010 $ 793,617
Accrued property taxes 1,667,283 1,668,201
Other accrued expenses 811,121 935,796
Rents received in advance 1,613,689 1,478,883
Current maturities of long-term debt 9,295,564 8,667,074
-------------- --------------
TOTAL CURRENT LIABILITIES 14,167,667 13,543,571
-------------- --------------
LONG-TERM DEBT 55,654,584 64,950,148
-------------- --------------
OTHER LONG-TERM LIABILITIES
Supplemental retirement benefits 1,504,227 963,091
Deferred income tax liability 1,454,000 1,936,000
-------------- --------------
2,958,227 2,899,091
-------------- --------------
COMMITMENT (Note G)
STOCKHOLDERS' DEFICIT
Common stock, $5 par value, 1,000,000 shares authorized,
527,638 shares issued and outstanding in 1999 and 1998 2,638,190 2,638,190
Additional paid-in capital 169,360 169,360
Accumulated deficit (21,637,373) (20,712,371)
-------------- --------------
(18,829,823) (17,904,821)
-------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $ 53,950,655 $ 63,487,989
============== ==============
- --------------------------------------------------------------------------------
See accompanying notes to financial statements. Page 2
11
F-3
INTERNATIONAL HOME FURNISHINGS CENTER, INC.
STATEMENTS OF INCOME
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
================================================================================
1999 1998 1997
---------------- --------------- ----------------
OPERATING REVENUES
Rental income $ 31,684,174 $ 31,046,712 $ 31,099,737
Other revenues 6,472,825 6,333,233 5,907,086
---------------- --------------- ----------------
TOTAL OPERATING REVENUES 38,156,999 37,379,945 37,006,823
---------------- --------------- ----------------
OPERATING EXPENSES
Compensation and benefits 4,084,283 3,648,331 3,503,952
Market and promotional 2,558,772 2,554,960 2,705,908
Maintenance and building costs 862,804 743,347 1,188,784
Depreciation expense 2,202,723 2,187,359 2,191,755
Rent 152,234 138,835 138,835
Property taxes and insurance 1,987,898 2,012,249 2,061,772
Utilities 1,652,068 1,769,612 1,685,299
Other operating costs 617,201 472,929 439,691
---------------- --------------- ----------------
TOTAL OPERATING EXPENSES 14,117,983 13,527,622 13,915,996
---------------- --------------- ----------------
INCOME FROM OPERATIONS 24,039,016 23,852,323 23,090,827
---------------- --------------- ----------------
NONOPERATING INCOME
Interest income 929,317 802,224 1,552,708
Dividend income 3,692 4,188 3,874
---------------- --------------- ----------------
TOTAL NONOPERATING INCOME 933,009 806,412 1,556,582
---------------- --------------- ----------------
NONOPERATING EXPENSES
Interest expense 4,936,077 1,517,248 -
---------------- --------------- ----------------
TOTAL NONOPERATING EXPENSES 4,936,077 1,517,248 -
---------------- --------------- ----------------
INCOME BEFORE INCOME TAXES 20,035,948 23,141,487 24,647,409
PROVISION FOR INCOME TAXES 7,770,000 9,103,000 9,542,000
---------------- --------------- ----------------
NET INCOME $ 12,265,948 $ 14,038,487 $ 15,105,409
================ =============== ================
BASIC EARNINGS PER COMMON SHARE $ 23.25 $ 26.61 $ 28.63
================ =============== ================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 527,638 527,638 527,638
================ =============== ================
- --------------------------------------------------------------------------------
See accompanying notes to financial statements. Page 3
12
F-4
INTERNATIONAL HOME FURNISHINGS CENTER, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
================================================================================
Retained
Additional Earnings
Common Paid-In (Accumulated
Stock Capital Deficit) Total
-------------- ------------- ------------- --------------
BALANCE, OCTOBER 31, 1996 $ 2,638,190 $ 169,360 $ 77,905,998 $ 80,713,548
Net income - - 15,105,409 15,105,409
Dividends paid ($97.50 per common share) - - (51,444,705) (51,444,705)
-------------- ------------- ------------- --------------
BALANCE, OCTOBER 31, 1997 2,638,190 169,360 41,566,702 44,374,252
Net income - - 14,038,487 14,038,487
Dividends paid ($144.64 per common share) - - (76,317,560) (76,317,560)
-------------- ------------- ------------- --------------
BALANCE (DEFICIT), OCTOBER 31, 1998 2,638,190 169,360 (20,712,371) (17,904,821)
Net income - - 12,265,948 12,265,948
Dividends paid ($25.00 per common share) - - (13,190,950) (13,190,950)
-------------- ------------- ------------- --------------
BALANCE (DEFICIT), OCTOBER 31, 1999 $ 2,638,190 $ 169,360 $ (21,637,373) $ (18,829,823)
============== ============= ============= ==============
- --------------------------------------------------------------------------------
See accompanying notes to financial statements. Page 4
13
F-5
INTERNATIONAL HOME FURNISHINGS CENTER, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED OCTOBER 31, 1999, 1998 AND 1997
================================================================================
1999 1998 1997
-------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 12,265,948 $ 14,038,487 $ 15,105,409
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,325,374 2,247,363 2,230,876
Provision for losses on accounts receivable 1,360 5,286 1,963
(Gain) loss on disposal of assets - (1,000) 2,000
Deferred income taxes (500,000) (77,000) (138,000)
Change in assets and liabilities
(Increase) decrease in trade and interest receivables (68,728) (290,003) 330,334
(Increase) decrease in prepaid expenses (750,264) 227,098 (35,698)
Increase (decrease) in accounts payable and
accrued expenses (139,200) 582,272 (267,282)
Increase (decrease) in rents received in advance 134,806 (19,689) 120,952
Increase in supplemental retirement benefits 541,136 159,350 147,547
-------------- -------------- --------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 13,810,432 16,872,164 17,498,101
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in restricted cash - (2,275,974) -
Purchase and construction of property and equipment (337,457) (484,257) (146,092)
Proceeds from sale of property and equipment - 1,000 2,000
Purchase of short-term investments (7,135) (5,199) (4,585)
Proceeds from maturity of short-term investments - - 150,000
-------------- -------------- --------------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES (344,592) (2,764,430) 1,323
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt - 75,000,000 -
Principal payments on long-term debt (8,667,074) (1,382,778) -
Payment of deferred financing costs - (584,709) -
Dividends paid (13,190,950) (76,317,560) (51,444,705)
-------------- -------------- --------------
NET CASH USED BY
FINANCING ACTIVITIES (21,858,024) (3,285,047) (51,444,705)
-------------- -------------- --------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (8,392,184) 10,822,687 (33,945,281)
CASH AND CASH EQUIVALENTS, BEGINNING 16,396,705 5,574,018 39,519,299
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS, ENDING $ 8,004,521 $ 16,396,705 $ 5,574,018
============== ============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Income taxes $ 9,049,420 $ 8,965,827 $ 9,707,600
Interest expense 4,988,768 1,069,696 -
- --------------------------------------------------------------------------------
See accompanying notes to financial statements. Page 5
14
F-6
INTERNATIONAL HOME FURNISHINGS CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999, 1998 AND 1997
================================================================================
NOTE A - DESCRIPTION OF BUSINESS
The Company is the lessor of permanent exhibition space to furniture and
accessory manufacturers which are headquartered throughout the United States and
in many foreign countries. This exhibition space, located in High Point, North
Carolina, is used by the Home Furnishings Industry to showcase its products at
the International Home Furnishings Market held each April and October. The
details of the operating leases with the Company's tenants are described in
Note I.
The Company has been in business since June 27, 1919, and operates under the
trade name of "International Home Furnishings Center."
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
The accounting policies relative to the carrying values of property and
equipment and theater complex are indicated in the captions on the balance
sheets. Other significant accounting policies are as follows:
Rental Income
Income from rental of exhibition space is recognized under the operating method.
Aggregate rentals are reported as income on the straight-line basis over the
lives of the leases, and expenses are charged as incurred against such income.
Future rentals under existing leases are not recorded as assets in the
accompanying balance sheets.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Investment Securities
The Company has investments in debt and marketable equity securities. Debt
securities consist of obligations of state and local governments and U. S.
corporations. Marketable equity securities consist primarily of investments in
mutual funds.
Management determines the appropriate classification of securities at the date
individual investment securities are acquired, and the appropriateness of such
classification is reassessed at each balance sheet date. Since the Company
neither buys investment securities in anticipation of short-term fluctuations in
market prices or commits to holding debt securities to their maturities,
investments in debt and marketable equity securities have been classified as
available-for-sale. Available-for-sale securities are stated at fair value, and
unrealized holding gains and losses, if significant, net of the related deferred
tax effect, are reported as a separate component of accumulated other
comprehensive income in stockholders' equity. Premiums and discounts on
investments in debt securities are amortized over their contractual lives.
Interest on debt securities is recognized in income as accrued, and dividends on
marketable equity securities are recognized in income when declared. Realized
gains and losses are included in income and are determined on the basis of the
specific securities sold.
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Page 6
15
F-7
INTERNATIONAL HOME FURNISHINGS CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999, 1998 AND 1997
================================================================================
NOTE B - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property, Equipment and Depreciation
Additions and major improvements to property and equipment are recorded at cost.
Expenditures for maintenance, repairs, and minor renewals are charged to expense
as incurred. Depreciation is provided primarily on the straight-line method over
the following estimated useful lives:
Land improvements 10 years
Building structures 20 to 50 years
Building components 5 to 20 years
Furniture and equipment 3 to 10 years
In accordance with the provisions of Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," the Company periodically reviews long-lived assets
when indicators of impairment exist, and if the value of the assets is impaired,
an impairment loss would be recognized.
Deferred Financing Costs
Costs associated with obtaining the term loan disclosed in Note E have been
deferred and are being amortized on the straight-line method over the term of
the related debt. Amortization expense charged to operations during the years
ended October 31, 1999 and 1998 was $83,530 and $20,883, respectively.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related to temporary differences between the reported amounts of assets and
liabilities and their tax bases. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
Earnings Per Common Share
During the year ended October 31, 1998, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share," which specifies
the computation, presentation and disclosure requirements for earnings per share
("EPS"). It replaces the presentation of primary and fully diluted EPS with
basic and diluted EPS. Basic EPS excludes all dilution and has been computed
using the weighted average number of common shares outstanding during the year.
Diluted EPS would reflect the potential dilution that would occur if securities
or other contracts to issue common stock were exercised or converted into common
stock. The Company has no dilutive potential common shares.
- --------------------------------------------------------------------------------
Page 7
16
F-8
INTERNATIONAL HOME FURNISHINGS CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999, 1998 AND 1997
================================================================================
NOTE B - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Retirement Plans
The Company maintains a 401(k) qualified retirement plan covering eligible
employees under which participants may contribute up to 25% of their
compensation subject to maximum allowable contributions. The Company is
obligated to contribute, on a matching basis, 50% of the first 6% of
compensation voluntarily contributed by participants. The Company may also make
additional contributions to the plan if it so elects.
In 1991, the Company adopted a nonqualified supplemental retirement benefits
plan for key management employees. Benefits payable under the plan are based
upon the participant's average compensation during his last five years of
employment and are reduced by benefits payable under the Company's qualified
retirement plan and by one-half of the participant's social security benefits.
Benefits under the plan do not vest until the attainment of normal retirement
age; however, a reduced benefit is payable if employment terminates prior to
normal retirement age because of death or disability. The Company has no
obligation to fund this supplemental plan.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE C - RESTRICTED CASH
Restricted cash consists of an interest-bearing debt service account. The
Company makes semi-annual escrow deposits each May and November in amounts
sufficient to provide interest and principal payments on the Company's term debt
for the ensuing six months.
NOTE D - INVESTMENT IN DEBT AND MARKETABLE EQUITY SECURITIES
The following is a summary of the Company's investment in available-for-sale
securities as of October 31, 1999 and 1998:
1999
------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- -------------- --------------- ---------------
Debt securities
State and local governments $ 5,103,547 $ - $ - $ 5,103,547
U. S. corporations 1,000,000 - - 1,000,000
Equity securities 90,778 - - 90,778
-------------- -------------- --------------- ---------------
$ 6,194,325 $ - $ - $ 6,194,325
============== ============== =============== ===============
- --------------------------------------------------------------------------------
Page 8
17
F-9
INTERNATIONAL HOME FURNISHINGS CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999, 1998 AND 1997
================================================================================
NOTE D - INVESTMENT IN DEBT AND MARKETABLE EQUITY SECURITIES (CONTINUED)
1998
------------------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- -------------- --------------- ---------------
Debt securities
State and local governments $ 10,528,478 $ - $ - $ 10,528,478
U. S. corporations 3,000,000 - - 3,000,000
Equity securities 83,643 - - 83,643
-------------- -------------- --------------- ---------------
$ 13,612,121 $ - $ - $ 13,612,121
============== ============== =============== ===============
Available-for-sale securities are classified in the following balance sheet
captions as of October 31, 1999 and 1998:
1999 1998
---------------- ----------------
Cash and cash equivalents $ 6,103,547 $ 13,528,478
Short-term investments 90,778 83,643
---------------- ----------------
$ 6,194,325 $ 13,612,121
================ ================
All the Company's debt securities mature within one year.
NOTE E - LONG-TERM DEBT
Long-term debt consists of the following at October 31, 1999 and 1998:
1999 1998
---------------- -----------------
Term note payable, principal and interest are due in monthly
installments of $1,137,987 through August 1, 2005, with interest
included at 7.06%, collateralized by land and buildings with a
carrying value of $37,870,349 at October 31, 1999 $ 64,950,148 $ 73,617,222
Less current maturities 9,295,564 8,667,074
---------------- -----------------
$ 55,654,584 $ 64,950,148
================ =================
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Page 9
18
F-10
INTERNATIONAL HOME FURNISHINGS CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999, 1998 AND 1997
================================================================================
NOTE E - LONG-TERM DEBT (CONTINUED)
The aggregate maturities of long-term debt are due as follows:
Year Ending October 31,
2000 $ 9,295,564
2001 9,995,880
2002 10,735,336
2003 11,529,494
2004 12,378,440
2005 11,015,434
----------------
$ 64,950,148
================
Under the provisions of the loan agreement, the Company is required, among other
things, to comply with restrictive loan covenants including maintaining certain
financial ratios and minimum levels of net worth and working capital. The
Company was in compliance with the terms of the loan agreement at October 31,
1999.
NOTE F - INCOME TAXES
The provision for income taxes consisted of the following for the years ended
October 31, 1999, 1998 and 1997:
1999 1998 1997
--------------- -------------- --------------
Federal:
Current $ 6,765,000 $ 7,450,000 $ 7,785,000
Deferred (395,000) (62,000) (109,000)
--------------- -------------- --------------
6,370,000 7,388,000 7,676,000
--------------- -------------- --------------
State:
Current 1,505,000 1,730,000 1,895,000
Deferred (105,000) (15,000) (29,000)
--------------- -------------- --------------
1,400,000 1,715,000 1,866,000
--------------- -------------- --------------
TOTAL $ 7,770,000 $ 9,103,000 $ 9,542,000
=============== ============== ==============
- --------------------------------------------------------------------------------
Page 10
19
F-11
INTERNATIONAL HOME FURNISHINGS CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999, 1998 AND 1997
================================================================================
NOTE F - INCOME TAXES (CONTINUED)
A reconciliation of the income tax provision at the federal statutory rate to
the income tax provision at the effective tax rate is as follows:
1999 1998 1997
--------------- -------------- --------------
Income taxes computed at the federal
statutory rate $ 7,013,000 $ 8,100,000 $ 8,627,000
State taxes, net of federal benefit 910,000 1,115,000 1,232,000
Nontaxable investment income (180,000) (196,000) (414,000)
Other, net 27,000 84,000 97,000
--------------- -------------- --------------
$ 7,770,000 $ 9,103,000 $ 9,542,000
=============== ============== ==============
The components of deferred income taxes consist of the following:
1999 1998 1997
--------------- -------------- --------------
Deferred income tax assets:
Rents received in advance $ 610,000 $ 592,000 $ 599,000
Supplemental retirement benefits 602,000 384,000 321,000
--------------- -------------- --------------
TOTAL DEFERRED TAX ASSETS 1,212,000 976,000 920,000
Deferred income tax liabilities:
Depreciation (2,056,000) (2,320,000) (2,341,000)
--------------- -------------- --------------
TOTAL NET DEFERRED TAX LIABILITIES $ (844,000) $ (1,344,000) $ (1,421,000)
=============== ============== ==============
NOTE G - LAND LEASE COMMITMENT
During 1975, the Company completed construction of an eleven-story exhibition
building. The building is constructed on land leased from the City of High
Point, North Carolina under a noncancelable lease. The lease is for an initial
term of fifty years with three options to renew for periods of ten years each
and a final renewal option for nineteen years. Annual rental under the lease is
$152,234 as of October 31, 1999 and is subject to adjustment at the end of each
five-year period, such adjustment being computed as defined in the lease
agreement. As part of the lease agreement, the Company constructed a theater
complex for public use and office space for use by the City of High Point on the
lower levels of the building. Annual rental cash payments over the initial
fifty-year lease term are being reduced by $39,121 which represents amortization
of the cost of the theater and office complex constructed for the City of High
Point. At the termination of the lease, the building becomes the property of the
City of High Point. Under the terms of the lease, the Company is responsible for
all expenses applicable to the exhibition portion of the building. The City of
High Point is responsible for all expenses applicable to the theater complex and
office space constructed for use by the City.
- --------------------------------------------------------------------------------
Page 11
20
F-12
INTERNATIONAL HOME FURNISHINGS CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999, 1998 AND 1997
================================================================================
NOTE H - RETIREMENT EXPENSE
Amounts expensed under the Company's retirement plans amounted to $691,698,
$268,856 and $293,974 for the years ended October 31, 1999, 1998 and 1997,
respectively, including $541,136, $159,350 and $147,547 under the supplemental
retirement benefits plan for the years ended October 31, 1999, 1998 and 1997,
respectively.
NOTE I - RENTALS UNDER OPERATING LEASES
The Company's leasing operations consist principally of leasing exhibition
space. Property on operating leases consists of substantially all of the asset
"buildings, exclusive of theater complex" included on the balance sheets.
Accumulated depreciation on this property amounted to $40,937,431 and
$38,909,532 at October 31, 1999 and 1998, respectively. Leases are typically for
five-year periods and contain provisions to escalate rentals based upon either
the increase in the consumer price index or increases in ad valorem taxes,
utility rates and charges, minimum wage imposed by federal and state
governments, maintenance contracts for elevators and air conditioning,
maintenance of common areas, social security payments, increases resulting from
collective bargaining contracts, if any, and such other similar charges and
rates required in operating the Company. Tenants normally renew their leases.
The following is a schedule of minimum future rentals under noncancelable
operating leases as of October 31, 1999, exclusive of amounts due under
escalation provisions of lease agreements:
Year Ending October 31,
2000 $ 20,148,486
2001 15,420,350
2002 11,530,905
2003 6,363,437
2004 1,245,236
Thereafter 74,639
----------------
Total minimum future rentals $ 54,783,053
================
Rental income includes contingent rentals under escalation provisions of leases
of $1,322,521, $1,401,867 and $1,534,413 for the years ended October 31, 1999,
1998 and 1997, respectively.
NOTE J - CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash deposits in excess of federally insured
limits and trade accounts receivable from customers predominantly in the Home
Furnishings Industry. As of October 31, 1999, the Company's bank balances
exceeded federally insured limits by $2,110,209. The Company's trade accounts
receivable are generally collateralized by merchandise in leased exhibition
spaces which is in the Company's possession.
- --------------------------------------------------------------------------------
Page 12
21
F-13
INTERNATIONAL HOME FURNISHINGS CENTER, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999, 1998 AND 1997
================================================================================
NOTE K - STOCKHOLDERS' DEFICIT
During the year ended October 31, 1998, the Company paid dividends of
$76,317,560 resulting in a deficit in stockholders' equity of $17,904,821 at
October 31, 1998. During the year ended October 31, 1999, the deficit was
increased because of the payment of dividends in excess of net income for the
year. The 1998 dividends were financed, in part, with the proceeds of a
$75,000,000 term loan. Although interest on this debt will negatively impact
future earnings, management believes future earnings will provide adequate
equity capital for the Company and that operating cash flows will be sufficient
to provide for debt service and for the Company's other financing and investing
needs.
NOTE L - CONSTRUCTION PLANS
The Company's Board of Directors has approved a project to add additional
exhibition space to the existing facilities. Although contractual commitments
have not been finalized, construction is expected to begin in January 2000 and
to be completed in time for tenants to utilize the additional exhibition space
for the April 2001 International Home Furnishings Market. The cost of the
construction is estimated to approximate $13,250,000 and plans are to fund the
cost with operating cash flows. The assessment of the cost and the timetable for
completion are management's estimates, and it is reasonably possible that actual
and estimated results will differ materially.
- --------------------------------------------------------------------------------
Page 13
22
INDEX TO FORM 10-K SCHEDULE
Exhibit No.
- -----------
F - 14 Report of Independent Public Accountants
F - 15 Bassett Furniture Industries, Incorporated. Schedule II -
Analysis of Valuation and Qualifying Accounts for the years
ended November 27, 1999, November 28, 1998 and November 30,
1997.
23
F-14
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Bassett Furniture Industries,
Incorporated:
We have audited in accordance with generally accepted auditing standards, the
financial statements included in the Bassett Furniture Industries, Incorporated
Annual Report to Stockholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated January 17, 2000. Our audit was made for
the purpose of forming an opinion on those statements taken as a whole. The
schedule on page F-15 is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Greensboro, North Carolina,
January 17, 2000.
24
F-15
BASSETT FURNITURE INDUSTRIES, INCORPORATED
Schedule II
Analysis of Valuation and Qualifying Accounts
For the Years Ended November 27, 1999, November 28, 1998 and November 30, 1997
Balance Additions Balance
Beginning Charged to End
Of Period Cost and Expenses Deductions Other Of Period
---------------------------------------------------------------------------------
(1)
For the Year Ended November 30, 1997:
Reserve deducted from
assets to which it applies-
Allowance for doubtful accounts $1,355 $7,706 $(7,077) --- $1,984
=================================================================================
Restructuring reserve --- $20,646 $(14,397) --- $6,249
=================================================================================
For the Year Ended November 28, 1998:
Reserve deducted from
assets to which it applies-
Allowance for doubtful accounts $1,984 $692 $(476) --- $2,200
=================================================================================
Restructuring reserve $6,249 --- $(3,760) --- $2,489
=================================================================================
For the Year Ended November 27, 1999:
Reserve deducted from
assets to which it applies-
Allowance for doubtful accounts $2,200 $680 $(322) --- $2,558
=================================================================================
Restructuring reserve $2,489 --- $(1,173) --- $1,316
=================================================================================
(1) Deductions are for the purpose for which the reserve was created.
25
F-16
BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998, AND
NOVEMBER 30, 1998
TOGETHER WITH AUDITORS' REPORT
26
F-17
BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
TABLE OF CONTENTS
PAGE
STATEMENTS OF FINANCIAL CONDITION
As of December 31, 1999 and 1998, and November 30, 1998 1
STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999,
The One Month Period Ended December 31, 1998, and
The Period From Inception (July 1, 1998) to November 30, 1998 2
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the Year Ended December 31, 1999,
The One Month Period Ended December 31, 1998, and
The Period From Inception (July 1, 1998) to November 30, 1998 3
STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 1999,
The One Month Period Ended December 31, 1998, and
The Period From Inception (July 1, 1998) to November 30, 1998 4
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998, and November 30, 1998 5
27
F-18
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Bassett Industries Alternative Asset Fund, L.P.:
We have audited the accompanying statements of financial condition of the
Bassett Industries Alternative Asset Fund, L.P. (a Delaware limited partnership)
as of December 31, 1999 and 1998, and November 30, 1998, and the related
statements of operations, changes in partners' capital and cash flows for the
year ended December 31, 1999, the one month period ended December 31, 1998, and
the period from inception (July 1, 1998) to November 30, 1998. These financial
statements are the responsibility of the general partner. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Bassett Industries
Alternative Asset Fund, L.P. as of December 31, 1999 and 1998, and November 30,
1998, and the results of its operations and its cash flows for the year ended
December 31, 1999, the one month period ended December 31, 1998, and the period
from inception (July 1, 1998) to December 31, 1998, in conformity with
accounting principles generally accepted in the United States.
/s/ Arthur Andersen LLP
Richmond, Virginia
February 25, 2000
28
F-19
BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
STATEMENTS OF FINANCIAL CONDITION
AS OF DECEMBER 31, 1999 AND 1998, AND NOVEMBER 30, 1998
ASSETS
DECEMBER 31, DECEMBER 31, NOVEMBER 30,
1999 1998 1998
----------- ----------- -----------
CASH AND CASH EQUIVALENTS $ 2,267 $ 5,562 $ 131,520
FUND INVESTMENTS (NOTE 4) 59,295,005 51,218,854 50,629,098
----------- ----------- -----------
Total assets $59,297,272 $51,224,416 $50,760,618
=========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accrued expenses $ 10,107 $ 16,950 $ 18,100
Payable to General Partner -- -- 82,420
----------- ----------- -----------
Total liabilities 10,107 16,950 100,520
----------- ----------- -----------
PARTNERS' CAPITAL:
General Partner 11,855 10,239 10,130
Limited Partner 59,275,310 51,197,227 50,649,968
----------- ----------- -----------
Total partners' capital 59,287,165 51,207,466 50,660,098
----------- ----------- -----------
Total liabilities and partners' capital $59,297,272 $51,224,416 $50,760,618
=========== =========== ===========
The accompanying notes are an integral part of these statements.
29
F-20
BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999,
THE ONE MONTH PERIOD ENDED DECEMBER 31, 1998, AND
THE PERIOD FROM INCEPTION (JULY 1, 1998) TO NOVEMBER 30, 1998
ONE MONTH PERIOD FROM
YEAR ENDED PERIOD ENDED INCEPTION
DECEMBER 31, DECEMBER 31, (JULY 1, 1998) TO
1999 1998 NOVEMBER 30, 1998
-------------- -------------- ------------------
REVENUES:
Net gain on fund investments $8,631,151 $ 589,756 $ 879,098
Interest income 6,308 340 2,271
----------- ----------- -----------
Total revenues 8,637,459 590,096 881,369
----------- ----------- -----------
EXPENSES:
Management fee 541,176 41,210 207,445
Other 16,584 1,518 23,826
----------- ----------- -----------
Total expenses 557,760 42,728 231,271
----------- ----------- -----------
NET INCOME $8,079,699 $ 547,368 $ 650,098
=========== =========== ===========
The accompanying notes are an integral part of these statements.
30
F-21
BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1999,
THE ONE MONTH PERIOD ENDED DECEMBER 31, 1998, AND
THE PERIOD FROM INCEPTION (JULY 1, 1998) TO NOVEMBER 30, 1998
LIMITED PARTNER GENERAL PARTNER TOTAL
---------------- ----------------- -------------
BALANCE, JULY 1, 1998
(INITIAL CAPITALIZATION) $50,000,000 $10,000 $50,010,000
Net income 649,968 130 650,098
-------------- --------- --------------
BALANCE, NOVEMBER 30, 1998 50,649,968 10,130 50,660,098
Net income 547,259 109 547,368
-------------- --------- --------------
BALANCE, DECEMBER 31, 1998 51,197,227 10,239 51,207,466
Net income 8,078,083 1,616 8,079,699
-------------- --------- --------------
BALANCE, DECEMBER 31, 1999 $59,275,310 $11,855 $59,287,165
============== ========= ==============
The accompanying notes are an integral part of these statements.
31
F-22
BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999,
THE ONE MONTH PERIOD ENDED DECEMBER 31, 1998, AND
THE PERIOD FROM INCEPTION (JULY 1, 1998) TO NOVEMBER 30, 1998
PERIOD FROM
INCEPTION
ONE MONTH (JULY 1, 1998)
YEAR ENDED PERIOD ENDED TO
DECEMBER 31, DECEMBER 31, NOVEMBER 30,
1999 1998 1998
---------------- --------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,079,699 $ 547,368 $ 650,098
Adjustment to reconcile net income to net cash
used in operating activities-
Net gain on fund investments (8,631,151) (589,756) (879,098)
Increase (decrease) in operating liabilities-
Payable to General Partner -- (82,420) 82,420
Accrued expenses (6,843) (1,150) 18,100
-------------- ------------ ---------------
Net cash used in operating activities (558,295) (125,958) (128,480)
-------------- ------------ ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fund investments -- -- (49,750,000)
Sales of fund investments 555,000 -- --
-------------- ------------ ---------------
Net cash provided by (used in) investing activities 555,000 -- (49,750,000)
-------------- ------------ ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Initial capitalization -- -- 50,010,000
-------------- ------------ ---------------
Net (decrease) increase in cash and cash equivalents (3,295) (125,958) 131,520
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 5,562 131,520 --
-------------- ------------ ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,267 $ 5,562 $ 131,520
============== ============ ===============
The accompanying notes are an integral part of these statements.
32
F-23
BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998, AND NOVEMBER 30, 1998
1. ORGANIZATION:
The Bassett Industries Alternative Asset Fund, L.P. (the "Partnership") was
organized under the Delaware Revised Uniform Limited Partnership Act and
commenced operations on July 1, 1998. Private Advisors, L.L.C. is the general
partner (the "General Partner") of the Partnership. Harris Trust & Savings
Bank is the asset custodian (the "Custodian") for the Partnership. Bassett
Furniture Industries, Inc. (the "Limited Partner") and the General Partner are
currently the only partners.
On February 23, 2000, the terms of the limited partnership agreement (the
"Agreement") were amended to change the Partnership's fiscal year end to
December 31. In association with this amendment, financial statements have been
prepared for the one month period from the previous fiscal year end (November
30, 1998) to December 31, 1998, and for the year ended December 31, 1999.
The objective of the Partnership is to invest with hedge funds and other
experienced portfolio managers or otherwise utilize the services of investment
advisers or investment managers in order to make investments in and to
purchase, hold, trade and sell securities. The General Partner has discretion
to make all investment and trading decisions, including the selection of
investment managers.
2. PARTNERSHIP AGREEMENT:
The Partnership is governed by the terms of the Agreement. A general summary of
salient points of the Agreement is provided below. Reference should be made to
the Agreement to obtain a complete understanding of all pertinent information.
MANAGEMENT OF PARTNERSHIP AFFAIRS - Responsibility for managing the Partnership
is vested solely with the General Partner. The General Partner's duties include
the selection of investment managers, monitoring of the Partnership's
investments, which includes the allocation of the Partnership's assets among
the selected investment managers on an ongoing basis, and various
administrative functions necessary to support the Partnership.
GENERAL PARTNER FEE - The General Partner receives a management fee from the
Partnership, payable quarterly, based on an annual rate of 1 percent as applied
to quarterly net assets, as defined.
CONTRIBUTION OF LIMITED PARTNER - The Limited Partner is required to make and
maintain an investment in the Partnership of not less than $1,000,000. The
Limited Partner may make a partial withdrawal of its investment as of the end
of any fiscal year, as defined, but at all times its capital account must not
be less than $1,000,000. The General Partner may, at its discretion, waive
these minimum requirements. Additional investments are permitted at the
discretion of the General Partner.
33
F-24
REDEMPTIONS - The Limited Partner may redeem part or all of its capital account
as of any calendar year-end upon 90 days written notice to the General Partner
(or such lesser notice as may be acceptable to the General Partner). The
General Partner may redeem part or all of its capital account as of any
calendar year-end, as defined, upon 45 days notice to the Limited Partner.
Redemptions shall be at net asset value, as defined.
ALLOCATIONS - Each partner has a capital account with an initial balance equal
to the amount each individual partner contributed to the Partnership. At the
end of each month and at the time of any event causing the capital account of
any partner to change, profits and losses are allocated to the accounts of the
partners in the ratio that each partner's capital account bears to the balance
of all partners' accounts. A separate allocation is performed for Federal
income tax purposes.
TERMINATION OF PARTNERSHIP - The Partnership shall terminate and be dissolved
upon the occurrence of any of the following events:
- - December 31, 2025;
- - the withdrawal, dissolution, insolvency, or removal of the General Partner;
- - the written consent of the General Partner and a majority-in-interest of the
Limited Partners; or
- - the election of a majority-in-interest of the Limited Partners, if the
Limited Partners determine that the General Partner has materially breached
any provision of the Agreement.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS - The Partnership considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
INTEREST INCOME - The Partnership receives interest monthly from the Custodian
based on prevailing short-term money market rates applied to 100 percent of the
Partnership's average daily cash balance above a specified reserve, as defined.
Interest income is accrued when earned.
INCOME TAXES - Income taxes have not been provided, as partners are
individually liable for taxes, if any, on their share of the Partnership's net
income or loss.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - The preparation
of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4. FUND INVESTMENTS:
The funds in which the Partnership invests engage primarily in speculative
trading of security interests and have the discretion to invest in any type of
security interest. Risks to these funds arise from the possible adverse changes
in the market value of such interests and the potential inability of
counterparties to perform under the terms of the contracts. However, the risk
to the Partnership is limited to the amount of the Partnership's investment in
each of these funds. In general, the Partnership may redeem part or all of its
investment in each of the funds as of the end of each quarter or calendar year,
upon 45 to 180 days prior written notice, as specified in the various fund
agreements.
34
F-25
Fund investments are valued on the basis of net asset value, with the resultant
difference from the prior valuation included in the accompanying statements of
operations. The net asset value is determined by the investee fund based on its
underlying financial instruments. The Partnership's share of the revenues and
expenses of each fund is based on the Partnership's proportionate share of
amounts invested during the period and is included as net gain (loss) on fund
investments in the accompanying statements of operations. The Partnership's
proportionate share of the investee funds' operating expenses, including
brokerage commissions and management and incentive fees, incurred directly by
the funds is reflected as a component of the net gain (loss) on fund
investments within the accompanying statements of operations.
The following schedule shows the cost (adjusted for purchases and sales) and
fair value of the Partnership's fund investments at December 31, 1999 and 1998,
and November 30, 1998, (the Partnership's percentage of ownership, or number of
shares, of each fund investment at December 31, 1999, is included in
parentheses):
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------------- -------------------------------
ADJUSTED FAIR ADJUSTED FAIR
COST VALUE COST VALUE
----------- ------------ ----------- ------------
Styx Partners, L.P. (6.60%) $10,487,307 $12,130,328 $10,750,000 $11,253,650
Palladin Enhanced Return Partners, L.P. (34.34%) 8,501,052 10,263,618 8,750,000 9,467,933
Oz Domestic Partners, L.P. (1.91%) 8,750,000 10,763,893 8,750,000 8,999,709
Farallon Capital Offshore Investors, Inc.
(1,912,530 Class A, Series A shares) 7,500,000 8,937,530 7,500,000 7,551,052
Double Black Diamond, L.P. (4.65%) 7,000,000 8,278,636 7,000,000 7,165,510
HBK Fund, L.P. (1.31%) 7,000,000 8,921,000 7,000,000 6,781,000
----------- ------------ ----------- ------------
$49,238,359 $59,295,005 $49,750,000 $51,218,854
=========== ============ =========== ============
NOVEMBER 30, 1998
----------------------------------
ADJUSTED FAIR
COST VALUE
------------ -------------
Styx Partners, L.P. (6.60%) $10,750,000 $11,214,142
Palladin Enhanced Return Partners, L.P. (34.34%) 8,750,000 9,321,290
Oz Domestic Partners, L.P. (1.91%) 8,750,000 8,854,787
Farallon Capital Offshore Investors, Inc.
(1,912,530 Class A, Series A shares) 7,500,000 7,412,832
Double Black Diamond, L.P. (4.65%) 7,000,000 7,161,047
HBK Fund, L.P. (1.31%) 7,000,000 6,665,000
------------ -------------
$49,750,000 $50,629,098
============ =============
5. OPERATING EXPENSES:
The Partnership pays its routine legal, accounting, audit, computer and other
operating costs. The net assets of the Partnership reflect an accrual for such
expenses incurred but not yet paid.
6. FINANCIAL INSTRUMENTS WITH MARKET AND CREDIT RISKS AND CONCENTRATIONS OF
CREDIT RISK:
In the normal course of operations, the Partnership enters into various
contractual commitments with elements of market risk in excess of the amounts
recognized in the statement of financial condition. Contractual commitments
that involve future settlement give rise to both market and credit risk. Market
risk represents the potential loss that can be caused by a change in the market
value of a particular financial instrument. The Partnership's exposure to
market risk is determined by a number of factors, including the size,
composition and diversification of positions held, volatility of interest,
market currency rates and liquidity. With reference to the Partnership's credit
and concentration of credit risks for investments in other security funds, the
risk to the Partnership is limited to the Partnership's investment.
35
INDEX TO EXHIBITS
Exhibit No.
- -----------
3 B Amendment to the By-laws dated January 18, 2000,
including the By-laws as amended.
4 $50 million Credit Agreement dated October 19, 1999 with First
Union National Bank
10F Severance Agreement and General Release dated January 31, 1999
between Registrant and Douglas N. Miller
10G Severance Agreement and General Release dated November 27,
1999 between Registrant and John S. Lupo
13 Portions of the Bassett Furniture Industries, Incorporated
Annual Report to Stockholders for the year ended November 27,
1999
21 List of subsidiaries of registrant
23A Consent of Independent Public Accountants
23B Consent of Independent Auditors
27 Financial Data Schedule (EDGAR filing only)